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It has become the norm for us to expect vehement criticisms of economic globalization from the left wing circles of the world, especially in the developing countries. That has been the most common breeding grounds for some of the harshest critics of this phenomenon viz. the Marxists, the environmentalists, the nationalists and even domestic entrepreneurs striving for subsidies and protection. This book comes from the heart of the developed world, the USA and from an individual who has not only had a brilliant academic career, but has also served in the highest strata of the bureaucracy of the developed world, and the international organization shaped by the ideas most preached by the same. Joseph Stiglitz has served in the Council of Economic Advisors to President Clinton, and has also served as the Chief Economist at the World Bank. Therefore, he has witnessed first hand events that shape much of the activities of the global economy and his account of the same is thus so very influential.

This book is also different because of its rooted belief in democracy, social equity, justice and most importantly, a freely functioning market economy. Often critiques have offered a wholesale alternative model viz. either the one with collective ownership of the means of production, or the one with protection and subsidies. Stiglitz does not offer a different model: he simply believes that the neo liberal policies of the Washington Consensus that dominate the international organizations such as the World Bank and more importantly, the IMF, are detrimental to achieving a functioning market economy. Ideologically speaking, he sides with Keynes rather than Hayek, emphasizing demand more than supply.

Stiglitz’s main achievement is to highlight in detail the inequities of the global order. He argues persuasively that the international organizations have promised much, but have failed miserably to keep up to most of them. He identifies the reason for the same as vested interests that dominate the international agencies. For example, the US being the largest contributor and the only member with an effective veto at the IMF often results in overt influence of the Treasury on the Fund, which pursues the interests of the finance lobbies of Wall Street rather than poor farmers in Botswana or Ethiopia, or that of the middle classes of the countries of the erstwhile USSR in transition from a command to a market economy. He blames the disparity in regulations relating to openness to foreign trade and subsidies as another example where international agencies have failed to implement global laws to developed countries, when all too often they forcibly apply these rules to the developing countries.

The IMF, according to Stiglitz, has not only been plagued with vested interests of a narrow elite in the western world, but it has also blinded itself with the spectacles of ideology. The IMF’s belief in the infallibility of markets is clearly misplaced. Markets when left on their own manage to distort their own functioning. Stiglitz points to the over capacity generated by the market in the construction industry of Thailand as one of the numerous examples of markets behaving badly. He associates such wastage of resources to the causes of the East Asian crisis in the late 90s, precipitated further by the callous policies of the IMF. He believes that market institutions must be in place before liberalization can be successfully pursued. He cites the disastrous case of Russia to show how lack of mechanisms, regulations and institutions led the market to severely distort itself, resulting in capital flight from the country, massive corruption during privatization and widespread unemployment and impoverishment.

However, Stiglitz’s most severe attack on the IMF comes because of the interventions the Fund has made in various economies, in times of crisis or not, that have managed to worsen the situation many times over. He cites the severe contractionary monetary policies imposed on the already severely indebted economies of East Asia, resulting in a bankruptcy spree and the economy sinking into further depression and unemployment and poverty soaring. He also condemns the various bailout plans arranged by the IMF, which have often served the interest of the rich in the country, at the expense of the middle classes and the poor. For instance, it was IMF which forced prices to be ‘market set’ in Russia as soon as it opened up, resulting in hyper inflation wiping off people’s savings. Then, realizing its folly, it induced a huge bailout package to support the currency which only managed to help the oligarchs from exporting their money to unknown Swiss accounts while common people found it harder to borrow, firms found it harder to export and imports flooded the domestic market at the expense of Russian products. Thus, Stiglitz manages to unclothe the IMF’s sermons regarding economic crisis and points out the mishaps in the Fund’s policies.

A staunch believer in gradual reform, Stiglitz demolishes the edifice of invincibility that ‘market fundamentalism’ has built for itself. He argues that markets are inherently embedded in the society, essentially echoing what Karl Polanyi wrote half a century ago, and if markets are not overseen by the society, they can be easily manipulated. The Nobel laureate economist cries out for global action, especially on behalf of the developed world, to restore faith in the international agencies by making them more accessible, fair and free from their ideological shackles. He calls for more flexibility and transparency in the global bureaucracies that determine the fate of billions behind closed doors.

All in all, a very entertaining read and a sizzling critique, not of the world market economy in the globalised era, but of the distorting elements in the same.